Correlation Between China Railway and Duzhe Publishing

Can any of the company-specific risk be diversified away by investing in both China Railway and Duzhe Publishing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Railway and Duzhe Publishing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Railway Materials and Duzhe Publishing Media, you can compare the effects of market volatilities on China Railway and Duzhe Publishing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Railway with a short position of Duzhe Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Duzhe Publishing.

Diversification Opportunities for China Railway and Duzhe Publishing

0.96

Correlation Coefficient

China Railway  Duzhe Publishing

Almost no diversification

The 3 months correlation between China and Duzhe is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Materials and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe Publishing Media and China Railway is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Railway Materials are associated (or correlated) with Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of China Railway i.e., China Railway and Duzhe Publishing go up and down completely randomly.

Pair Corralation between China Railway and Duzhe Publishing

Assuming the 90 days trading horizon China Railway is expected to generate 1.62 times less return on investment than Duzhe Publishing. But when comparing it to its historical volatility, China Railway Materials is 1.26 times less risky than Duzhe Publishing. It trades about 0.08 of its potential returns per unit of risk. Duzhe Publishing Media is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  486.00  in Duzhe Publishing Media on September 5, 2024 and sell it today you would earn a total of  150.00  from holding Duzhe Publishing Media or generate 30.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

China Railway Materials  vs.  Duzhe Publishing Media

China Railway Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Railway sustained solid returns over the last few months and may actually be approaching a breakup point.

Duzhe Publishing Media

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Duzhe Publishing Media are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duzhe Publishing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Railway and Duzhe Publishing

The main advantage of trading using opposite China Railway and Duzhe Publishing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, Duzhe Publishing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Duzhe Publishing will offset losses from the drop in Duzhe Publishing's long position.

The idea behind China Railway Materials and Duzhe Publishing Media pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.